Just as everyone thought the en bloc phenomenon was dying, there was a revival in en bloc sales in the second half of 2021. Alas, the government stepped in with their new raft of property cooling measures in December 2021, which was akin to pouring cold water on prospecting developers’ heads, dampening the en bloc market once again.
So, what does the en bloc market have in store for us in 2023? And could your property be one of the top condos with en bloc potential in 2023? Let’s find out.
En Bloc in Singapore: What Is It?
But first, what exactly is “en bloc”, and why can it be so lucrative for those lucky enough to be involved?
The term en bloc (also known as a collective sale) is French in origin and means “in a lump, or block”, “as a whole”, or “all together”. En bloc sales differ from regular property transactions in terms of scale. In a regular transaction, you only sell one property to another individual at market value. In an en bloc in Singapore, the entire private development is sold when a large majority of the owners agree to the sale, selling their homes simultaneously to a particular buyer.
Usually, this buyer is a property developer buying a private development, which is the collective sale type that this article will cover.
Many homeowners in Singapore hope and pray that their property will have en bloc potential and be selected for a collective sale, and for good reason. En bloc sale prices are usually well above market rate as developers tend to be willing to pay top dollar for a choice site. So, unsurprisingly, a successful en bloc sale can be like winning the property lottery.
Why Do En Bloc Sales in Singapore Command so Much Money?
Since developers believe they can earn a tidy profit from redeveloping an en bloc site, they are not averse to paying astronomical sums of money. As older developments typically do not use space as effectively as newer ones, the Gross Floor Area (GFA) and plot ratio of older developments can be maximised by developers to extract maximum value from an en bloc site.
For example, if you’re living in an old gated property with low-rise blocks spaced far apart, developers can buy up the land, demolish all those blocks and build 30-storey towers in their place. They can then sell each unit in those towers for more money than it would cost them to acquire that land.
Since a collective sale requires most of the residents to agree to sell their homes, the developers have to convince them that it’s worth giving up their property and moving elsewhere. They do this by offering large amounts of money, hoping the residents will take up the offer.
En Bloc Sales: How Does It Work?
|Who is making the en bloc purchase?||Either a property developer or the government|
|Sales process||Can take up to two years|
|What is sold in the en bloc?||Every unit in the condo + the land|
|How much can you sell for?||The en bloc committee will typically set a reserve price that is set at a premium above the current market price.
The buyer (i.e. property developer or government) will try to match the reserve price or negotiate with the en bloc committee.
|When is an en bloc confirmed?||When the en bloc committee gets a consensus to sell from the owners.
For condos < 10 years since TOP, you need ≥ 90% of all owners to agree to sell.
For condos ≥ 10 years since TOP, you need ≥ 80% of all owners to agree to sell.
The sale process can also take rather long, often up to two years for the sale to be finalised and for you to receive the sales proceeds.
Developers tend to purchase these properties at a premium, so if you bought your property some time ago when it cost less, you’re likely to walk away with a big profit.
It then hardly becomes surprising that potential en bloc sites are a hot topic among Singaporeans. The question on most peoples’ minds is likely about which properties are next in line and if their property is one of the top condos with en bloc potential in 2023.
2023 Housing Market: Where Is the En Bloc Market Heading towards?
According to Property Guru’s Singapore Property Market Index Q4 2021, the Singapore government has been calibrating the land supply in the past few years. This has made developers focus on en bloc sales to replenish their depleted land banks. And as the cost is high for larger en bloc sites, developers favoured smaller- to medium-sized en bloc launches in 2022 instead.
That is not to say larger condominiums will definitely make it onto the failed en bloc list and not have a chance to be one of the top condos with en bloc potential in 2023. In July 2022, the 446-unit Chuan Park sold for $890 million, and was the biggest en bloc sale since the collective sale of Tulip Garden in January 2019, that is, until it was given a stop order by the Strata Titles Board in December 2022, when six minority owners objected to the transaction.
ABSD Rates for Entities Buying Any Residential Property
|8 Dec 2011 to 11 Jan 2013||10%|
|12 Jan 2013 to 5 Jul 2018||15%|
|6 Jul 2018 to 15 Dec 2021||25%, plus an additional 5% for housing developers|
|On or after 16 Dec 2021||35%, plus an additional 5% for housing developers|
Still, en bloc offers in Singapore have been slowing down ever since the government started implementing property cooling measures like increasing Additional Buyer’s Stamp Duty (ABSD) rates, which can amount to a huge sum given that en bloc transactions can go over a billion dollars.
With economic uncertainty and the threat of recession looming over our heads, it’s no surprise that the en bloc market might slow down in 2023.
According to Dr. Tan Tee Khoon, Country Manager – Singapore, PropertyGuru, the relatively higher ABSD rates (caused by the December 2021 property cooling measures), rising interest rates and construction costs, and increased land betterment charge rates are likely to be factors affecting en bloc sales. Mortgage loan rates impacting borrowing and affordability also impact local buying demand.
Still, some developers might be tempted to try sites on the failed en bloc list in 2023. Last year, 24 sites made it onto the failed en bloc list; only 12 en bloc sites were sold out of 36 placed on the market in 2022. In their second and subsequent attempts at collective sales, several failed en bloc sale sites may have their asking prices reduced, making it even more enticing for developers.
So comes the question: does your condo come with en bloc potential? Below we list a few ways to identify condos with en bloc potential.
How to Identify Top Condos with En Bloc Potential 2023
1. Rising Land Value
If your neighbourhood is undergoing lots of development, such as a new MRT station or a major transformation, the land value in the area could be rapidly rising, which is a sign of good investment potential from the developers’ point of view.
2. Inefficient Use of Land
Old blocks or condo estates that don’t fully utilise their land area have higher chances of being one of Singapore’s top condos with en bloc potential, as they can be demolished and turned into denser residential developments. If you’re living in a block of flats with only eight floors where there could be multiple 30-storey condo towers, it’s an attractive investment for a property developer.
3. Old Property
Developers gravitate towards older properties because the value per square metre of land is lower, and residents who live in older properties tend to be a bit more agreeable to collective sales. Furthermore, developers only need to obtain at least 80% of the owners’ agreement for properties 10 years and older versus 90% for properties below 10 years old.
4. Robust Property Market
En bloc sales in Singapore involve a lot of money, so they are more likely to happen if developers think they can profit from buying and redeveloping the land. The performance of the market will play a part in how often developers bid for new sites and how much they’ll offer.
Tip: To spot future property trends and identify top condos with en bloc potential in 2023, refer to the Master Plan 2019 to see the government’s plans for land use development over the next 10 to 15 years.
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